Ethanol fuel, Consumer theory, Ethanol

Reference: 540292

Level: College

Words: 641

Short excerpt:

The federal subsidy has ended in 2014 and farmers are feeling the pinch because the ethanol production has plummeted. Ethanol was used in the place of gasoline by blending it in certain proportion that has raised the demand of ethanol. It is known that gasoline has a huge demand. To reduce gasoline consumption, the government has provided subsidy to blenders of the ethanol. The withdrawal of subsidy now makes blending costly to that extent. Corn is a raw material for producing ethanol and thus, it suffers lesser demand from the ethanol producers. As per the law of demand and supply of economics, lesser demand of corn will push the price of corn down ward to an extent so that equilibrium in demand and supply reaches. Individual corn farmers will thus face the state of lesser demands then